Makati Tuscany Condominium Corporation v.

Court of Appeals
American Home Assurance Co., represented by American
International Underwriters (Phits.), Inc.
G.R. No. 95546, November 6, 1992
FACTS:
Sometimes in early 1982, private respondent American Home Assurance Co.
(AHAC), represented by American International Underwriters (Phits), Inc., issued in
favor of Makati Tuscany Condominium Corporation (TUSCANY) an insurance policy
on the latters building and premises, for a period of one year beginning March 1,
1982 to March 1, 1983, with a total premium of P466, 103.05. The premium was
paid on installments which were accepted by private respondent. The private
respondent issued TUSCANY another insurance policy which replaced and renewed
the previous policy. The same routine was done just like in the first insurance policy.
On the third renewal of the policy, AHAC issued it again to the TUSCANY and
TUSCANY made two installment payments which were accepted by AHAC, but
TUSCANY refused to pay the balance of the premium. On the ground that TUSCANY
refused to pay the said balance, AHAC filed a complaint and an action to recover the
unpaid balance. TUSCANY then filed an answer with counter claim. It admitted the
issuance of the said insurance policy and explained why it discontinued the
premium payments. TUSCANY even claimed that the policy was never binding and
valid and no risk attached to the policy. Thus, it pleaded a counterclaim for P
152,000.00 for the premiums already paid for 1984-85 and in its answer with
amended counterclaim sought the refund of P924, 206.10 representing the premium
payments for 1982-85. Both parties moved the summary judgment and the trial
court dismissed the complaint. They appealed the judgment of the trial court to the
court of Appeals. The court of Appeals then ordered to pay the balances plus legal
interest until fully paid, thus, affirming the denial of the counterclaim by TUSCANY.
ISSUE:
Whether or not the payment of the premiums due on an insurance policy invalidates
the contract of insurance.
HELD:
The obligation to pay premiums when due is ordinarily as indivisible obligation to
pay the entire premium. The parties herein agreed to make the premiums payable
in installments, and there is no pretense that the parties never envisioned to make
the insurance contract binding between them. It was renewed for two succeeding
years, the second and third policies being renewed and replaced the previous one.
And the insured never informed the insured that it was terminating the policy
because the terms were unacceptable. Under Section 77 of the Insurance Code, the
parties may not agree to make the insurance contract valid and binding without
payment of premiums, there is nothing in said section which suggest the parties
may not agree to allow payment of the premiums in installment, or to consider the
contract are valid and binding upon payment of the first premium. Otherwise, we
would allow the insurer t renege on its liability under the contract, had a loss
incurred before completion of payment of the entire premium, despite its
voluntary acceptance of partial payments, a result eschewed by basic
considerations of fairness and equity. The insurance contract become valid and
binding upon payment of the that payment was not made in full, for the reason that
it agreed to accept installment payment.